Russia’s invasion of Ukraine will be costly. And not just to the countries directly involved. And especially if we take into account its human cost.
Warning: this is a high-flying theoretical and economic exercise because this war has such diverse and complex impacts. It’s even worse when you also want to take human damage into account and make a numerical estimate, even a rough one.
Result: Russia’s invasion of Ukraine will cost the countries directly involved (Ukraine, Russia and Belarus) a little more than US$2.6 trillion in lost economic growth, destruction of infrastructure and brain drain, a calculated economist Dan Ciuriak in a study released Thursday by the CD Howe Institute. That is a little more than the value of all the production of the Canadian economy in one year (2000 billion).
The bill will rise to 4250 billion if we add the impact of the conflict on the economic activity of other countries. But if we look at the economic cost of the dead, the wounded and the human suffering inflicted, we should rather speak of a war of at least 9,000 to 14,000 billion, and probably more.
The bill
With enemy troops and bombs ravaging the country for more than five months, more than seven million citizens displaced and another five million fleeing the country, Ukraine is of course the first hit. Its gross domestic product (GDP) is expected to shrink by almost half this year, according to the World Bank. As the value of its real estate (72 billion), transport (69 billion) or even industrial (19 billion) infrastructures destroyed in just 22 weeks already exceeds 180 billion, its economy will show a cumulative loss of growth of at least 500 billion. by 2027. Provided that armed fighting does not overflow the borders of the Donbass region and into the present year.
The bill promises to be salty also for the instigator of the conflict. Subject to a barrage of financial and commercial sanctions, Russia has become a pariah for Western economies and risks remaining so (–1600 billion/5 years).
Between 50,000 and 70,000 of its technology workers had also already turned their backs on it before the end of March, and another 70,000 to 100,000 were about to leave the country in turn. Young, urban, multilingual and open to the world, these exiles will constitute a tremendous potential for lost growth (–260 billion).
This Ukrainian crisis comes in a global economy already struggling with several problems. If one tries to isolate its contribution to rising energy and food prices, rising interest rates and falling consumer and business confidence, experts say, one can attribute to it a cost, over one year, of at least 1500 billion to the rest of the world economy and another 90 billion over three years thereafter in Europe.
But all this remains below the human cost, reports Dan Ciuriak. A cost that is described each time as “horrible” in the absence of more precise figures, except for the number of dead, injured and displaced, he said. However, there are ways to assign an economic value to these human tragedies, particularly in terms of human capital and the capacity to produce wealth lost with each death, each maimed and each person directly or indirectly traumatized. “These estimates are very theoretical, admits the economist, but serve to highlight these costs which can be very high. »
In Ukraine alone, the economic cost of dead or injured soldiers and civilians is thus estimated to date to be between 100 and 216 billion, while the impact of trauma caused by war on the life expectancy of the population of some 38 million people would amount to between 2500 and 5400 billion. In the rest of Europe, the return of war on the continent and the nuclear threat will also have been a hard shock for the populations, just as the soaring prices and the fear of recession will have particularly hurt the nerves of the most vulnerable (a price to pay between 960 and 1500 billion). And what about the impact of the explosion in food prices in poor countries, particularly in sub-Saharan Africa, where 14 million more people are now threatened by famine (between 950 and 2200 billion).
Conservative estimate
But all these amounts, although dizzying, are very incomplete, warns Dan Ciuriak. They do not take into account, for example, the fall in stock market values caused by the war, nor the billions spent on military aid to Ukraine or the reception of its exiles abroad, nor even the lost wealth. when communities, like Mariupol or Sievierodonetsk, are completely razed.
And these are not the only things that had to be left out, laments the economist. It is that there will also be an economic price to this new fracture in entrenched camps of the world economy. The sudden obligation for governments to increase their military budget is also very likely to be to the detriment of other expenditures in education, health or infrastructure more useful to the economy and the well-being of their population. And then, this general commotion to ensure their national energy security has forced several countries to back down rather than move forward in their necessary and urgent transition to green energy sources.